UK manufacturing activity hits highest since June 2014


UK factories enjoyed their best month in two and a half years in December, according to a key survey of the country’s private sector firms which showed evidence of soaring new orders, helped along by a weaker pound.

IHS Markit’s survey of British manufacturers hits 56.1 last month, accelerating from the 53.6 hit in November – the best reading since June 2014 and defying economists’ expectations of a slight fall at the end of the year.

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Any number abov 50 indicates expansion, with the survey revealing a boose for UK industry from the falls in sterling following the Brexit vote.

“Companies benefited from stronger inflows of new work from both domestic and overseas clients, the later aided by the boose to competitiveness from the weak sterling exchange rate”, said IHS Markit.

The pace of expansion in new order and output – two sbugauges within the index – was the fastest in the survey’s 25 year history, noted Rob Dobson at Markit.

“The boose to competitiveness from the weak exchange rate has undoubtedly been a key driver of the recent turnaround, while the domestic market has remained a stron contributor to new business wins”, said Mr. Dobson.

Shortrun activitiy in the British economy has held up better than many forecast in the wake of the UK’s leave vote in late June, boosted by robust levels of household spending.

“The 18% post referendum plunge in the value of the pound against other major currencies has boosted the UK’s competitiveness on the international stage”, said James Kinghtley at ING.

December’s figures suggest the manufacturing sector expanded by 1% in the last three months of the year, following a 0.8% contraction in the quarter prior, said Ruth Gregory at Capital Economics.

Despite the boose for manufactures, a weaker exchange rate is expected to stoke inflation, leading to higer import costs and placing a squeeze on consumer spending in 2017.